Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

The number of shares of the registrant’s Common Stock outstanding as of ~~October 27, 2010~~April 25, 2011 was ~~43,888,778.~~44,502,932.


(in thousands, except share amounts)	September 30, 2010		December 31, 2009		March 31, 2011		December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	26,253	$	22,769	$	24,126	$	27,974
Donor restricted cash		18,905		12,874		14,870		16,359
Accounts receivable, net of allowance of $3,068 and $3,559 at September 30, 2010 and December 31, 2009, respectively		55,969		50,220
Accounts receivable, net of allowance of $2,636 and $2,687 at March 31, 2011 and December 31, 2010, respectively						50,311		59,804
Prepaid expenses and other current assets		19,988		18,155		26,796		33,847
Deferred tax asset, current portion		5,728		5,728		5,160		5,164

Total current assets		126,843		109,746		121,263		143,148
Property and equipment, net		22,622		22,507		23,819		22,963
Deferred tax asset		52,099		55,570		40,839		44,639
Goodwill		73,804		73,919		88,935		76,247
Intangible assets, net		37,472		42,019		44,852		38,515
Other assets		2,543		468		2,614		2,579


Total assets	$	315,383	$	304,229	$	322,322	$	328,091


Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	6,266	$	10,683	$	9,858	$	9,883
Accrued expenses and other current liabilities		23,371		25,974		23,518		28,322
Donations payable		18,905		12,874		14,870		16,359
Debt, current portion		420		1,288
Deferred revenue		143,086		129,412
Deferred revenue, current portion						135,489		141,149

Total current liabilities		192,048		180,231		183,735		195,713
Deferred revenue, noncurrent		7,077		6,172
Other noncurrent liabilities		1,612		1,720
Deferred revenue						6,126		6,900
Other liabilities						3,288		2,419


Total liabilities		200,737		188,123		193,149		205,032


Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding		-		-		-		-
Common stock, $0.001 par value; 180,000,000 shares authorized, 52,591,454 and 52,214,606 shares issued at September 30, 2010 and December 31, 2009, respectively		53		52
Common stock, $0.001 par value; 180,000,000 shares authorized, 53,350,536 and 53,316,280 shares issued at March 31, 2011 and December 31, 2010, respectively						53		53
Additional paid-in capital		149,770		134,726		162,320		158,419
Treasury stock, at cost; 8,703,005 and 7,677,341 shares at September 30, 2010 and December 31, 2009, respectively		(157,455)		(134,382)
Treasury stock, at cost; 8,846,663 and 8,842,882 shares at March 31, 2011 and December 31, 2010, respectively						(161,288)		(161,186)
Accumulated other comprehensive loss		(337)		(201)		(463)		(512)
Retained earnings		122,615		115,911		128,551		126,285


Total stockholders’ equity		114,646		116,106		129,173		123,059


Total liabilities and stockholders’ equity	$	315,383	$	304,229	$	322,322	$	328,091

The accompanying notes are an integral part of these consolidated financial statements.


	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
(in thousands, except share and per share amounts)		2010		2009			2010		2009			2011		2010
Revenue
License fees		$	5,070	$	5,919		$	17,209	$	19,123		$	4,551	$	5,167
Subscriptions													25,510		19,176
Services			23,992		22,818			64,967		66,412			24,032		20,089
Maintenance			31,416		29,742			92,970		86,574			31,833		30,597
Subscriptions			21,235		19,190			60,797		53,686
Other revenue			1,513		1,536			4,193		4,566			1,348		1,210


Total revenue			83,226		79,205			240,136		230,361			87,274		76,239

Cost of revenue
Cost of license fees			626		987			2,218		2,871			688		617
Cost of subscriptions													9,162		7,226
Cost of services			17,008		15,269			48,761		46,990			19,005		15,916
Cost of maintenance			6,310		5,498			18,005		16,078			6,251		5,770
Cost of subscriptions			7,950		7,462			22,792		21,240
Cost of other revenue			1,381		1,325			3,831		4,136			1,134		1,117


Total cost of revenue			33,275		30,541			95,607		91,315			36,240		30,646


Gross profit			49,951		48,664			144,529		139,046			51,034		45,593


Operating expenses
Sales and marketing			16,953		15,778			52,399		46,965			19,345		16,423
Research and development			11,776		11,389			34,395		34,151			11,966		10,909
General and administrative			7,901		7,420			23,199		24,872			9,202		8,397
Amortization			195		194			587		572			233		196


Total operating expenses			36,825		34,781			110,580		106,560			40,746		35,925


Income from operations			13,126		13,883			33,949		32,486			10,288		9,668
Interest income			21		32			64		131			33		20
Interest expense			(45)		(181)			(170)		(876)			(24)		(46)
Other income (expense), net			53		226			(129)		96
Other income, net													69		3


Income before provision for income taxes			13,155		13,960			33,714		31,837			10,366		9,645
Income tax provision			4,636		4,132			12,453		11,349			2,782		3,693


Net income		$	8,519	$	9,828		$	21,261	$	20,488		$	7,584	$	5,952


Earnings per share
Basic		$	0.20	$	0.23		$	0.49	$	0.48		$	0.17	$	0.14
Diluted		$	0.20	$	0.22		$	0.48	$	0.47		$	0.17	$	0.13

Common shares and equivalents outstanding
Basic weighted average shares			42,747,209		42,781,072			43,145,289		42,805,498			43,352,216		43,435,218
Diluted weighted average shares			43,472,822		43,826,550			43,880,554		43,493,362			43,916,657		44,226,074
Dividends per share		$	0.11	$	0.10		$	0.33	$	0.30		$	0.12	$	0.11

The accompanying notes are an integral part of these consolidated financial statements.


	Nine months ended September 30,				Three months ended March 31,
(in thousands)	2010		2009		2011		2010
Cash flows from operating activities
Net income	$	21,261	$	20,488	$	7,584	$	5,952
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,955		11,563		4,017		3,819
Provision for doubtful accounts and sales returns		1,960		2,082		1,124		457
Stock-based compensation expense		9,240		9,062		3,796		3,152
Excess tax benefits from stock based compensation		(1,161)		(4,806)		(193)		(1,014)
Deferred taxes		3,480		5,896		382		795
Other non-cash adjustments		(114)		94		(561)		(160)
Changes in assets and liabilities, net of acquisition of businesses:
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable		(7,549)		1,389		9,113		696
Prepaid expenses and other assets		(779)		447		7,146		3,274
Trade accounts payable		(771)		(198)		(1,547)		61
Accrued expenses and other current liabilities		(2,800)		2,625		(6,373)		(6,356)
Donor restricted cash		(6,020)		(4,129)		1,527		3,147
Donations payable		6,020		4,129		(1,527)		(3,147)
Deferred revenue		14,141		11,713		(6,976)		(3,348)

Net cash provided by operating activities		48,863		60,355		17,512		7,328

Cash flows from investing activities
Purchase of property and equipment		(10,597)		(3,865)		(1,073)		(5,069)
Purchase of net assets of acquired companies, net of cash acquired		(390)		(2,258)		(16,475)		-
Purchase of investment		(2,000)		-
Purchase of intangible assets		(130)		-		-		(130)
Proceeds from sale of assets						600		-

Net cash used in investing activities		(13,117)		(6,123)		(16,948)		(5,199)

Cash flows from financing activities
Proceeds from issuance of debt		4,000		-
Payments on debt		(4,868)		(42,275)
Payments on capital lease obligations		(135)		(300)
Purchase of treasury stock		(22,613)		-
Dividend payments to stockholders		(14,609)		(13,206)		(5,336)		(4,910)
Proceeds from exercise of stock options		4,695		2,127		316		2,654
Excess tax benefits from stock based compensation		1,161		4,806		193		1,014
Payments on debt						-		(187)
Payments on capital lease obligations						(14)		(81)

Net cash used in financing activities		(32,369)		(48,848)		(4,841)		(1,510)

Effect of exchange rate on cash and cash equivalents		107		493		429		(107)

Net increase in cash and cash equivalents		3,484		5,877
Net (decrease) increase in cash and cash equivalents						(3,848)		512
Cash and cash equivalents, beginning of period		22,769		16,361		27,974		22,769

Cash and cash equivalents, end of period	$	26,253	$	22,238	$	24,126	$	23,281

The accompanying notes are an integral part of these consolidated financial statements.


	Comprehensive income			Common stock							Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)			Retained earnings			Total stockholders’ equity						Comprehensive income		Common stock				Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders’ equity
(in thousands, except share amounts)			Shares				Amount						Treasury stock					Retained earnings						Shares		Amount							Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders’ equity
Balance at December 31, 2008	Comprehensive income					51,269,081			$	51	Additional paid-in capital		$	116,846	Accumulated other comprehensive income (loss)	$	(130,594)		$	(899)	Total stockholders’ equity		$	105,104	$	90,508	Comprehensive income
Balance at December 31, 2009																														52,214,606	$	52	$	134,726	$	(134,382)	$	(201)	$	115,911	$	116,106
Net income	$	28,447			-				-			-		-		-			28,447			28,447					$	29,805		-		-		-		-		-		29,805		29,805
Payment of dividends		-			-				-			-		-		-			(17,673)			(17,673)						-		-		-		-		-		-		(19,490)		(19,490)
Issuance of common stock		-			55,661				-			1,215		-		-			-			1,215
Purchase of 1,007,082 treasury shares under stock repurchase program																												-		-		-		-		(22,613)		-		-		(22,613)
Exercise of stock options and stock appreciation rights		-			451,580				1			2,509		-		-			-			2,510						-		729,295		1		8,064		-		-		-		8,065
Surrender of 182,875 shares upon restricted stock vesting and stock appreciation right exercise		-			-				-			-		(3,788)		-			-			(3,788)
Surrender of 158,459 shares upon restricted stock vesting and exercise of stock appreciation rights																												-		-		-		-		(4,191)		-		-		(4,191)
Tax impact of exercise of nonqualified stock options and restricted stock vesting		-			-				-			2,290		-		-			-			2,290						-		-		-		2,629		-		-		-		2,629
Stock-based compensation		-			-				-			11,417		-		-			33			11,450						-		-		-		13,000		-		-		59		13,059
Restricted stock grants		-			492,964				-			449		-		-			-			449						-		460,659		-		-		-		-		-		-
Restricted stock cancellations		-			(54,680)				-			-		-		-			-			-						-		(88,280)		-		-		-		-		-		-
Translation adjustment, net of tax		698			-				-			-		-		698			-			698						(311)		-		-		-		-		(311)		-		(311)

Comprehensive income	$	29,145																									$	29,494
Balance at December 31, 2009					52,214,606			$	52		$	134,726	$	(134,382)	$	(201)		$	115,911		$	116,106
Balance at December 31, 2010																														53,316,280	$	53	$	158,419	$	(161,186)	$	(512)	$	126,285	$	123,059

Net income	$	21,261			-				-			-		-		-			21,261			21,261					$	7,584		-		-		-		-		-		7,584		7,584
Payment of dividends		-			-				-			-		-		-			(14,609)			(14,609)						-		-		-		-		-		-		(5,336)		(5,336)
Purchase of 1,007,082 treasury shares under stock repurchase program		-			-				-			-		(22,613)		-			-			(22,613)
Exercise of stock options and stock appreciation rights		-			430,028				1			4,695		-		-			-			4,696						-		53,097		-		316		-		-		-		316
Surrender of 28,208 shares upon restricted stock vesting and exercise of stock appreciation rights		-			-				-			-		(460)		-			-			(460)
Surrender of 3,781 shares upon restricted stock vesting and exercise of stock appreciation rights																												-		-		-		-		(102)		-		-		(102)
Tax impact of exercise of nonqualified stock options and restricted stock vesting		-			-				-			1,161		-		-			-			1,161						-		-		-		(193)		-		-		-		(193)
Stock-based compensation		-			-				-			9,188		-		-			52			9,240						-		-		-		3,778		-		-		18		3,796
Restricted stock grants		-			26,756				-			-		-		-			-			-						-		5,103		-		-		-		-		-		-
Restricted stock cancellations		-			(79,936)				-			-		-		-			-			-						-		(23,944)		-		-		-		-		-		-
Translation adjustment, net of tax		(136)			-				-			-		-		(136)			-			(136)						49		-		-		-		-		49		-		49

Comprehensive income	$	21,125																									$	7,633
Balance at September 30, 2010					52,591,454			$	53		$	149,770	$	(157,455)	$	(337)		$	122,615		$	114,646
Balance at March 31, 2011																														53,350,536	$	53	$	162,320	$	(161,288)	$	(463)	$	128,551	$	129,173

The accompanying notes are an integral part of these consolidated financial statements.

Blackbaud, Inc. (the Company) is the leading global provider of software and related services designed specifically for nonprofit organizations, and provides products and services that enable nonprofit organizations to increase donations, reduce fundraising costs, improve communications with constituents, manage their finances and optimize internal operations. As of ~~September 30, 2010,~~March 31, 2011, the Company had approximately 24,000 active customers distributed across multiple verticals within the nonprofit market including education, foundations, health and human services, religion, arts and cultural, public and societal benefits, environment and animal welfare and international foreign affairs.

The interim consolidated financial statements as of ~~September 30, 2010,~~March 31, 2011, and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009,~~ have been prepared by the Company pursuant to the rules and regulations of the SEC for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows and consolidated statements of stockholders’ equity and comprehensive income for the periods presented in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated balance sheet at December 31, ~~2009~~2010 has been derived from the audited consolidated financial statements at that date. Operating results for the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2010~~2011 or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2009~~2010 and other forms filed with the SEC from time to time.

During the ~~nine~~three months ended ~~September 30, 2010,~~March 31, 2011, the Company recorded ~~net~~an out-of-period ~~adjustments resulting in a net increase to expense of $0.2~~adjustment that increased income from operations by $0.8 million, ~~which is comprised of (1) $0.3~~$0.5 million net of tax, for the ~~reversal~~recognition of ~~an accrual~~net revenue and related commission expense associated with ~~compensation expense related to 2009, offset by (2) $0.5 million, net of tax, of commission expense~~subscription-based solutions for ~~the correction of errors~~which revenue had not been properly recorded in ~~the recognition of deferred sales commissions.~~prior periods. The Company has determined that the ~~net~~ impact of ~~these~~this out-of-period ~~adjustments~~adjustment recorded in the three months ended March 31, 2011 is immaterial to the results of operations in all applicable ~~current and~~ prior ~~interim and~~ annual periods. The Company also expects the impact of the ~~adjustments~~adjustment to be immaterial to the full year ~~2010~~2011 results of operations.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. ~~The Company evaluates subsequent events through the date the financial statements are issued.~~

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Areas of the financial statements where estimates may have the most significant effect include revenue recognition, the allowance for sales returns and doubtful accounts, valuation of long-lived and intangible assets and goodwill, stock-based compensation, ~~and~~the provision for income taxes and valuation of deferred tax assets. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from these estimates.

The Company’s revenue is primarily generated from the following sources: (1) selling perpetual licenses of its software ~~products,~~products; (2) ~~providing professional services including implementation, training, consulting, hosting and other services, (3) providing software maintenance and support services and (4)~~ charging for the use of its software products in a hosted ~~environment.~~environment; (3) providing professional services including implementation, training, consulting, analytic, hosting and other services; and (4) providing software maintenance and support services.

The Company recognizes revenue from the sale of perpetual software license rights when all of the following conditions are met:

The Company deems ~~execution~~acceptance of an agreement to be evidence of an arrangement. Delivery occurs when the product is shipped or transmitted, and title and risk of loss have transferred to the ~~customer.~~customers. The Company’s typical license agreement does not include customer acceptance provisions; however, if acceptance provisions are provided, delivery is deemed to occur upon acceptance. The Company considers the fee to be fixed or determinable unless the fee is subject to refund or adjustment or is not payable within the Company’s standard payment terms. Payment terms greater than 90 days are considered to be beyond the Company’s customary payment terms. ~~License fee revenue in arrangements with payment terms beyond the Company’s customary payment terms is deferred until the payment is due.~~ Collection is deemed probable if the Company expects that the customer will be able to pay amounts under the arrangement as they become due. If the Company determines that collection is not probable, it defers revenue recognition until collection.

The Company sells software licenses with maintenance, varying levels of professional services and, in certain instances, with hosting services. The Company allocates revenue to delivered components, normally the license component of the arrangement, using the residual value method based on objective evidence of the fair value of the undelivered elements, which is specific to the Company. Fair value for maintenance services associated with software licenses is based upon renewal rates stated in the agreements with customers, which vary according to the level of support service provided under the maintenance program. Fair value of professional services and other products and services is based on sales of these products and services to other customers when sold on a stand-alone basis. When a software license is sold with software customization services, generally the services are to provide customer support for assistance in creating special reports and other enhancements that will assist with efforts to improve operational efficiency and/or to support business process improvements. These services are not essential to the functionality of the software. However, when software customization services are considered essential to the functionality of the software, the Company recognizes revenue for both the software license and the services on a percent-complete basis.

The Company provides hosting services to customers who have purchased perpetual rights to certain of its software products (hosting services). Revenue from hosting services, as well as data enrichment services, data management services and online training programs is recognized ratably over the service period of the contract, which generally ranges from one to three years, upon deployment and use of the service. Any related set-up fees are also recognized ratably over the same service period of the contract.

For arrangements that have multiple elements and do not include software licenses, the Company allocates arrangement consideration at the inception of the arrangement to those elements that qualify as separate units of accounting. The arrangement consideration is allocated to the separate units of accounting based on relative selling price method in accordance with the selling price hierarchy, which includes: (i) vendor specific objective evidence (VSOE) if available; (ii) third party evidence (TPE) if VSOE is not available; and (iii) best estimate of selling price if neither VSOE nor TPE is available. In general, the Company uses VSOE in order to allocate the selling price to subscription and service deliverables.

Revenue from transaction processing fees is recognized when received. Credit card fees directly associated with processing donations for customers are included in subscription revenue, net of related transaction costs.

The Company generally bills consulting, installation and implementation services based on hourly rates plus reimbursable travel-related expenses. Revenue is recognized for these services over the period the services are performed. For service engagements of less than $10,000, the Company frequently contracts for and bills based on a fixed fee plus reimbursable travel-related expenses. The Company recognizes this revenue upon completion of the work performed.

The Company recognizes analytic services revenue from donor prospect research engagements, the sale of lists of potential donors, benchmarking studies and data modeling service engagements upon delivery.

The Company sells training at a fixed rate for each specific class, at a per attendee price or at a packaged price for several attendees, and revenue is recognized only upon the customer attending and completing training. Additionally, the Company sells a fixed-rate ~~program,~~programs, which ~~permits~~permit customers to attend unlimited training over a specified contract period, typically one year, subject to certain restrictions, and revenue is recognized ratably over this contract period.

The Company recognizes revenue from maintenance services ratably over the contract term, which is typically one year. Maintenance contracts are at rates that vary according to the level of the maintenance program and are generally renewable annually. Maintenance contracts also include the right to unspecified product upgrades on an if-and-when available basis. Certain support services are sold in prepaid units of time and recognized as revenue upon their usage.

The Company provides hosting services to customers who have purchased perpetual rights to certain of its software products (hosting services). Revenue from hosting services, as well as data enrichment services, data management services and online training programs is recognized ratably over the service period of the contract. Any related set-up fees are also recognized ratably over the service period of the contract.

The Company makes certain of its software products available for use in hosted application arrangements without licensing perpetual rights to the software (hosted applications). Revenue from hosted applications is recognized over the subscription agreement, which generally ranges from one to three years. For contractual arrangements covering the use of hosted applications, the stand-alone value of the delivered items or the fair value of undelivered items in the arrangement has not been established. Such items include upfront activation, implementation and hosting of the solution. For these arrangements the Company treats the transaction as a single element and the revenue is deferred until the hosted application is deployed and in use, at which time revenue is recognized over the remaining term of the arrangement. Direct and incremental costs relating to activation and implementation are capitalized until the hosted application is deployed and in use, and then expensed over the remaining term of the arrangement.

To the extent that the Company’s customers are billed or pay for the above described services in advance of delivery, the Company records such amounts in deferred revenue.

As discussed in Note 13, the Company reorganized its business into three operating units which resulted in a change in reportable segments effective January 1, 2010. As a result of the change in reportable segments, the Company tested goodwill for impairment as of January 1, 2010 and there was no impairment of goodwill. Goodwill has been reallocated among the new reportable segments as of December 31, 2009. The change in goodwill by reportable segment during the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011 consisted of the following:


(in thousands)	ECBU		GMBU		IBU		Other		Total		ECBU		GMBU		IBU		Other		Total
Balance at December 31, 2009	$	40,625	$	26,472	$	4,713	$	2,109	$	73,919
Balance at December 31, 2010											$	43,152	$	26,472	$	4,514	$	2,109	$	76,247
Additions related to business combinations												12,560		-		-		-		12,560
Disposition related to sale of assets												-		-		-		(51)		(51)
Effect of foreign currency translation		-		-		(115)		-		(115)		-		-		179		-		179

Balance at September 30, 2010	$	40,625	$	26,472	$	4,598	$	2,109	$	73,804
Balance at March 31, 2011											$	55,712	$	26,472	$	4,693	$	2,058	$	88,935

Amortization expense related to intangible assets acquired in business combinations is allocated to cost of revenue on the statements of operations based on the revenue stream to which the asset contributes. The following table summarizes amortization expense for the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 and ~~2009.~~2010.


	Three months ended September 30,				Nine months ended September 30,				Three months ended March 31,
(in thousands)	2010		2009		2010		2009		2011		2010
Included in cost of revenue:
Cost of license fees	$	116	$	95	$	325	$	266	$	132	$	94
Cost of subscriptions										801		760
Cost of services		343		336		1,020		1,006		387		336
Cost of maintenance		310		326		913		976		252		297
Cost of subscriptions		760		807		2,280		2,432
Cost of other revenue		19		19		56		56		19		19

Total included in cost of revenue		1,548		1,583		4,594		4,736		1,591		1,506
Included in operating expenses		195		194		587		572		233		196

Total	$	1,743	$	1,777	$	5,181	$	5,308	$	1,824	$	1,702

~~In October 2009,~~Effective January 1, 2011, the ~~FASB released~~Company adopted Accounting Standards Update (ASU) 2009-13, which amends the existing criteria for separating consideration in multiple-deliverable arrangements. Arrangements that include perpetual software licenses are excluded from the scope of this ASU. ASU 2009-13 establishes a hierarchy for determining the selling price of a deliverable and requires the use of best estimate of the selling price when VSOE or ~~third party evidence (TPE)~~TPE of the selling price cannot be determined. As a result of the requirement to use the best estimate of the selling price when ~~vendor specific objective evidence~~VSOE or ~~third party evidence~~TPE of the selling price cannot be determined, the residual method will no longer be permitted. ASU 2009-13 is applicable prospectively for revenue arrangements entered into or materially modified after the adoption ~~date or retrospectively for all periods presented.~~date. The ~~Company is required to adopt ASU 2009-13 on January 1, 2011. Early~~ adoption ~~is permitted. The Company is currently evaluating the impact~~ of ASU 2009-13 did not have a material impact on ~~its~~the Company’s consolidated financial statements.

On ~~April 29, 2009,~~February 1, 2011, the Company acquired all of the outstanding stock of ~~RLC Customer Centric Technology B.V. (RLC)~~Public Interest Data, Inc. (PIDI), a privately held ~~limited liability~~ company based in ~~the Netherlands,~~Virginia, for ~~€1.8~~$16.6 million in ~~cash, or the equivalent of $2.4 million based on the foreign exchange rate at the time of the acquisition.~~cash. The acquisition of ~~RLC~~PIDI provided the Company ~~with a foundation to expand into~~additional capabilities in the ~~Netherlands~~area of donor acquisition list analytics and ~~other Western European markets.~~should enhance the Company’s database management services offerings. The results of operations of PIDI are included in the consolidated financial statements of the Company from the date of acquisition. During the first three months of 2011, total revenue from PIDI was $1.4 million and cost of revenue was $0.9 million. Acquisition-related costs of $1.0 million, which primarily consisted of legal and financial advisory services, were recorded in income from operations during the three months ended March 31, 2011.

results of operations of RLC are included in the consolidated financial statements of the Company and the International Business Unit reportable segment (see Note 13) from the date of acquisition. During the nine months ended September 30, 2010, total revenue from RLC was $2.2 million and cost of revenue was $0.9 million. During the period from the date of acquisition through September 30, 2009 total revenue from RLC was $1.0 million and cost of revenue was $0.5 million.

In addition to the ~~initial purchase price,~~consideration paid at closing, the Company may be required to pay up to a maximum of ~~€400,000, or the equivalent of $0.5~~$2.5 million ~~based on the foreign exchange rate at the time of the acquisition,~~ in ~~earn-out payments~~additional cash consideration if ~~RLC~~PIDI meets revenue ~~and EBITDA margin~~ targets ~~as defined in the agreement,~~ over the two years subsequent to the acquisition. A liability of ~~$0.2~~$1.4 million was initially recognized for the estimated contingent consideration that will be paid based on a probability-weighted discounted cash flow valuation technique. ~~During~~Any change in the ~~nine months ended September 30, 2010, the Company recognized $0.1 million of income, as a result~~fair value, or any change upon final settlement, of the ~~change~~contingent consideration liability will be recognized in income from operations.

The following table summarizes the allocation of the purchase price based on the estimated fair value of the ~~contingent consideration liability. This amount~~assets acquired and liabilities assumed:

The estimated fair value of accounts receivable approximates contractual value. The goodwill recognized is attributable primarily to the assembled workforce of PIDI and the opportunities for expected synergies. None of the goodwill arising in the acquisition is deductible for income tax purposes. All of the goodwill is assigned to the Enterprise Customer Business Unit reporting segment. The acquisition resulted in the identification of the following intangible assets:

The fair value of the intangible assets was ~~recorded as~~based on the income approach, which included both the relief of royalty and multi-period excess earnings methods. Customer relationships are amortized on an accelerated basis. Marketing assets, acquired software and non-compete agreements are amortized on a ~~reduction~~straight-line basis.

Pro forma results of ~~general and administrative expense.~~operations for PIDI have not been presented because the results of PIDI are not material to the Company’s consolidated financial results.

The Company computes basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares and dilutive potential common shares then outstanding. Diluted earnings per share reflect the assumed conversion of all dilutive securities using the treasury stock method. Dilutive potential common shares consist of shares issuable upon the exercise of stock options, ~~and~~ settlement of stock appreciation rights ~~vesting of shares of non-vested restricted stock~~ and vesting of ~~shares of non-vested performance share award~~ restricted stock ~~units. Additionally, dilutive potential common shares for the three~~awards and nine months ended September 30, 2009 includes shares issuable for certain contingent liabilities that were payable in shares of common stock based on the number of shares that would be issuable if September 30, 2009 had been the end of the contingency period. units.

The following table sets forth the computation of basic and diluted earnings per share:

The following shares and potential shares underlying stock-based awards were not included in diluted earnings per share because their inclusion would have been anti-dilutive:

Total comprehensive income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ is as follows:


	Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
(in thousands)	2010		2009		2010			2009		2011		2010
Net income	$	8,519	$	9,828	$	21,261		$	20,488	$	7,584	$	5,952
Foreign currency translation adjustment, net of tax		148		54		(136	)		735		49		(274	)

Comprehensive income	$	8,667	$	9,882	$	21,125		$	21,223	$	7,633	$	5,678

The amount of tax allocated to the translation adjustment recorded in accumulated other comprehensive income (loss) was an expense of ~~less than $0.1~~$30,000 and a benefit of $0.2 million for ~~each of~~ the three months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009. For the nine months ended September 30, 2010 and 2009, a tax benefit of $0.1 million and $0.4 million, respectively, was allocated~~respectively.

Notes to ~~the translation adjustment recorded in accumulated other comprehensive income.~~consolidated financial statements

Prepaid expenses and other current assets consisted of the following as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009:~~2010:

Accrued expenses and other current liabilities consisted of the following as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009:~~2010:


(in thousands)	September 30, 2010			December 31, 2009		March 31, 2011			December 31, 2010
Accrued commissions and salaries							$	5,237	$	5,922
Accrued bonuses		$	7,917	$	8,699			4,567		8,952
Customer credit balances			3,542		3,536			3,339		3,379
Taxes payable			3,465		3,196			3,314		3,683
Accrued commissions and salaries			2,537		3,800
Accrued health care costs								886		862
Accrued accounting and legal fees			1,224		1,124			847		1,083
Accrued health care costs			877		1,394
Other			3,809		4,225			5,328		4,441

Total accrued expenses and other current liabilities		$	23,371	$	25,974		$	23,518	$	28,322

The Company has a ~~five-year $75.0~~$90.0 million revolving credit facility expiring in July 2012, which ~~expires July 2012. Under the terms of the credit agreement, the Company may elect not more than twice over the term of the agreement~~has a remaining option to increase the amount available under the facility ~~for an aggregate amount of~~ up to ~~$50.0~~an additional $35.0 million, subject to certain terms and conditions. ~~In 2008, the Company exercised one of its options and increased the credit facility by $15.0 million to an aggregate available amount of $90.0 million.~~ The revolving credit facility is guaranteed by ~~certain~~the material domestic subsidiaries and is collateralized with the ~~Company’s equity holdings in~~stock of all of ~~its~~the Company’s subsidiaries. At ~~September 30,~~March 31, 2011 and December 31, 2010, there were no outstanding borrowings under the credit facility.

Amounts borrowed under the revolving credit facility bear interest, at the Company’s option, at a variable rate based on (a) on the higher of the prime rate plus a margin of up to 0.5% or federal funds rate plus a margin of 0.5% to 1.0% (Base Rate Loans) or (b) LIBOR plus a margin of 1.0% to 1.5% (LIBOR Loans). The exact amount of any margin depends on the nature of the loan and the leverage ratio at the time of the borrowing. The Company also pays a quarterly commitment fee on the unused portion of the revolving credit facility equal to 0.2%, 0.25% or 0.3% per annum, depending on the Company’s leverage ~~ratio, as defined in the credit agreement.~~ratio.

Under the credit facility the Company has the ability to choose either Base Rate Loans or LIBOR Loans. Base rate borrowings mature in July 2012. LIBOR Loans can ~~have~~be one, two, three or six month maturities, and the Company has the ability to extend the maturity of these loans by rolling them at their maturity into new loans with the same or longer maturities. The Company evaluates the classification of its debt based on the maturity of individual borrowings and any roll-over of borrowings subsequent to the balance sheet date, but prior to issuance of the financial statements.

As a result of the acquisition of Kintera, the Company assumed a note payable that Kintera executed on December 1, 2007 in the amount of $3.2 million for the purchase of computer equipment. The note is collateralized by the underlying computer equipment, bears interest at a rate of 11.34% and has a maturity date of November 30, 2010. The Company recorded the note at its fair value as of the acquisition date, which resulted in an increase of $0.1 million in the carrying value. Based on the short-term nature of the note payable at September 30, 2010, the Company has determined that the fair value of this note payable approximates its carrying value of $0.4 million.

The Company leases its headquarters facility from Duck Pond Creek, LLC. Two current executive officers of the Company each have a 4% ownership interest in Duck Pond Creek, LLC. The lease agreement has a term of 15 years with two five-year renewal options by the Company. The annual base rent of the lease is $3.6 million payable in equal monthly installments. The base rent escalates annually at a rate equal to the change in the consumer price index, as defined in the agreement, but not to exceed 5.5% in any year. In addition, under the terms of the lease, the lessor will reimburse the Company an aggregate amount of $4.0 million for leasehold improvements, which will be recorded as a reduction to rent expense ratably over the term of the lease. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ rent expense was reduced by $66,700 ~~and $200,000, respectively,~~ related to this lease provision. The $4.0 million leasehold improvement allowance has been included in the table below of operating lease commitments as a reduction in the Company’s lease commitments ratably over the then remaining life of the lease from October 2008. The timing of the reimbursements for the actual leasehold improvements may vary from the amount reflected in the table below.

Additionally, the Company has subleased a portion of its facilities under various agreements extending through 2012. Under these agreements, rent expense was reduced by $0.1 million in each of the three-month periods ended March 31, 2011 and 2010, respectively. The operating lease commitments in the table below have been reduced by minimum aggregate sublease commitments of ~~$0.1 million,~~ $0.3 million ~~and $0.2 million during 2010,~~for each of 2011 and ~~2012, respectively.~~2012. No minimum aggregate sublease commitments exist after 2012. Rent expense was reduced by sublease income of $0.1 million for each of the three months ended September 30, 2010 and 2009, and $0.3 million for each of the nine months ended September 30, 2010 and 2009. The Company has also received, and expects to receive through 2012, quarterly South Carolina state incentive payments as a result of locating its headquarters facility in Berkeley County, South Carolina. These amounts are recorded as a reduction of rent expense and were ~~$0.5~~$0.7 million ~~and $0.4 million~~ for each of the three months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009, respectively, and were $1.6 million and $1.4 million for the nine months ended September 30, 2010 and 2009,~~ respectively.

Additionally, the Company leases various office space and equipment under operating leases. The Company also has various non-cancelable capital leases for computer equipment and ~~furniture.~~furniture that are not significant.

As of ~~September 30, 2010,~~March 31, 2011, the future minimum lease commitments related to operating lease agreements, net of related sublease commitments and lease incentives, were as follows:

The Company utilizes third-party relationships in conjunction with its products, with contractual arrangements varying in length from one to three years. In certain cases, these arrangements require a minimum annual purchase commitment. The aggregate minimum purchase commitment under these arrangements is approximately ~~$5.3~~

$3.5 million through 2013. The Company incurred expense under these arrangements of ~~$1.3~~$1.1 million and ~~$0.6~~$0.8 million for the three months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009, respectively, and $3.4 million and $1.8 million for the nine months ended September 30, 2010 and 2009,~~ respectively.

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business. The Company records an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company does not believe the amount of potential liability with respect to these actions will have a material adverse effect upon the Company’s financial position, results of operations or cash flows.

The Company calculated the provision for income taxes for the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 using the ~~2010~~2011 projected annual effective tax rate of ~~38.9%~~36.3%, which excludes period-specific items. The Company’s effective tax rate, ~~for the three and nine months ended September 30, 2010 and 2009,~~ including the effects of period-specific events, was as follows:

Period-specific items recorded in the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 included ~~the recognition~~a decrease of tax benefits related to a change in estimate for 2009 research and development credits of $0.5 million, net of reserves for uncertain tax positions. Period-specific items recorded in the three and nine months ended September 30, 2009 include (i) the recognition of tax benefits related to changes in estimates of 2007 and 2008 research and development credits and domestic production activities deductions of $1.0 ~~million, net of reserves for uncertain tax positions, (ii) an increase of $0.8~~ million in the valuation allowance for certain state ~~tax credits and~~ net operating loss carryforwards, ~~and (iii) a correction of an immaterial prior period error of $0.4 million,~~ which reduced income tax expense. There were no material period-specific items recorded in the three months ended March 31, 2010.

The Company has deferred tax assets for, among other items, federal net operating loss carryforwards, state net operating loss carryforwards, and state tax credits. A portion of the state net operating loss carryforwards and state tax credits have a valuation ~~allowance~~reserve due to the uncertainty of realizing such carryforwards and credits in the future. Additionally, the Company has a valuation allowance for certain state deferred tax assets acquired from Kintera.

The Company recorded net excess tax benefits on stock option ~~and stock appreciation right~~ exercises and restricted stock vesting of ~~$1.2~~$0.2 million and ~~$4.8~~$1.0 million in stockholders’ equity during the ~~nine~~three months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009,~~ respectively.

The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effective tax rate, was ~~$1.2~~$1.5 million at ~~September 30, 2010.~~March 31, 2011. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. The total amount of accrued interest and penalties ~~included in~~was not material to the consolidated balance sheet as of ~~September 30,~~March 31, 2011 or December 31, 2010, ~~was $0.2 million.~~ or to the consolidated statement of operations for the three months ended March 31, 2011 or 2010.

The Company has taken positions in certain taxing jurisdictions related to state nexus issues for which it is reasonably possible that ~~these~~the total amounts of unrecognized tax benefits ~~may significantly~~might decrease within the next twelve ~~months and be recognized as a reduction of tax expense. The~~months. This possible decrease ~~relates to state nexus issues and~~ could result from the finalization of state income tax reviews ~~and/or~~and the expiration of statutes of limitations. The reasonably possible decrease is not material at March 31, 2011.

be the Company’s intention to indefinitely reinvest undistributed foreign earnings. Accordingly, no deferred tax liability has been recorded in connection with the undistributed foreign earnings. It is not practicable for the Company to determine the amount of the unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries.

During the ~~nine~~three months ended ~~September 30, 2010,~~March 31, 2011, the Company issued ~~26,756~~5,103 shares of restricted stock and ~~300,000~~20,240 stock appreciation rights with an aggregate grant date fair value of ~~$0.6~~$0.1 million and ~~$2.0~~$0.2 million, respectively. The Company also issued ~~performance share awards of~~performance-based restricted stock units to certain executive officers with an aggregate grant date value range of zero to ~~$2.1~~$1.3 million depending on the achievement of the various performance targets. Under the ~~performance share award~~performance-based restricted stock unit agreements, if the minimum performance targets are not met, the restricted stock units will not vest and no shares of the Company’s common stock will be granted. Compensation cost for the ~~performance~~performance-based awards iswill be recognized to the extent the performance targets are achieved using the graded-vesting method over the requisite service period of 3three years. No stock options were issued in the ~~nine~~three months ended ~~September 30, 2010.~~March 31, 2011.

Stock-based compensation expense is allocated to expense categories on the consolidated statements of operations. The following table summarizes stock-based compensation expense for the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 and ~~2009.~~2010.


	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
(in thousands)		2010		2009			2010		2009			2011		2010
Included in cost of revenue:
Cost of subscriptions												$	102	$	92
Cost of services		$	380	$	335		$	1,230	$	1,072			457		436
Cost of maintenance			219		230			574		544			242		177
Cost of subscriptions			112		120			279		353

Total included in cost of revenue			711		685			2,083		1,969			801		705
Included in operating expenses:
Sales and marketing			272		422			977		1,093			357		361
Research and development			715		718			2,130		2,115			843		711
General and administrative			1,482		992			4,050		3,885			1,795		1,375

Total included in operating expenses			2,469		2,132			7,157		7,093			2,995		2,447

Total		$	3,180	$	2,817		$	9,240	$	9,062		$	3,796	$	3,152

~~The following table provides information with respect to quarterly dividends~~In February 2011, the Company’s Board of Directors approved an annual dividend of $0.48 per share and declared its first quarter dividend of $0.12 per share, which was paid on ~~common stock during the nine months ended September 30, 2010.~~March 15, 2011 to stockholders of record on February 28, 2011.

In ~~November 2010,~~May 2011, the Company’s Board of Directors declared a ~~fourth~~second quarter dividend of ~~$0.11~~$0.12 per share payable on ~~December~~June 15, ~~2010~~2011 to stockholders of record on ~~November 26, 2010.~~

During the nine months ended September 30, 2010, restricted stock and stock appreciation rights holders surrendered 28,208 shares of common stock, totaling $0.7 million, to satisfy their tax obligations due upon vesting.

Effective August 1, 2010, the Company’s Board of Directors approved a new stock repurchase program that authorizes the Company to purchase up to $50.0 million of its outstanding shares of common stock. The new program does not have an expiration date. The prior program expired on July 31, 2010, and the remaining balance at the time of expiration was $8.2 million. The shares can be purchased from time to time on the open market or in privately negotiated transactions depending upon market conditions and other factors.

~~The Company accounts for purchases of treasury stock under the cost method. During the nine months ended September 30, 2010 the Company purchased 1,007,082 shares for $22.6 million.~~May 27, 2011.

~~Effective January 1, 2010, the~~The Company ~~reorganized its business~~is organized into three operating units that are aligned to ~~better align its organization around~~ key customer groups. The three operating units are the Enterprise Customer Business Unit (ECBU), the General Markets Business Unit (GMBU) and the International Business Unit (IBU).

The Company has determined that the three operating units represent the Company’s reportable segments. The ~~Company's~~Company’s chief operating decision maker is its chief executive officer, or CEO. The CEO reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and

assessing financial performance. The CEO uses internal financial reports that provide segment revenues and operating income, excluding stock-based compensation expense, amortization expense, depreciation expense, research and development expense and certain corporate sales, marketing, general and administrative expenses. The CEO believes that the exclusion of these costs allows for a better understanding of the operating performance of the operating units and management of other operating expenses and cash needs. The CEO does not review any segment balance sheet information.

The Company has recast its segment disclosures for 2009 in order to present comparable financial results for the new reportable segments. Summarized reportable segment financial results for the three and nine months ended September 30, 2010 and 2009 were as follows:


(in thousands)	Three months ended September 30,					Nine months ended September 30,					Three months ended March 31,
		2010		2009			2010		2009		2011		2010
Revenue by segment:
ECBU		$	35,135	$	31,406		$	95,493	$	89,491	$	36,999	$	29,233
GMBU			39,979		38,866			119,566		116,590		41,017		38,625
IBU			6,675		7,466			20,271		19,967		7,216		6,735
Other			1,437		1,467			4,806		4,313
Other⁽¹⁾												2,042		1,646

Total revenue		$	83,226	$	79,205		$	240,136	$	230,361	$	87,274	$	76,239

Segment operating income:
Segment operating income⁽²⁾:
ECBU			14,687		13,014			37,286		34,813		14,999		12,512
GMBU			22,006		22,429			65,821		65,633		23,021		22,578
IBU⁽¹⁾			1,233		2,208			4,327		5,703
Other			667		701			2,491		1,619
IBU												1,449		1,440
Other⁽¹⁾												1,552		1,142

			38,593		38,352			109,925		107,768		41,021		37,672
Less:
Corporate unallocated costs⁽²⁾⁽³⁾			20,544		19,875			61,555		60,912		25,113		23,150
Stock based compensation costs			3,180		2,817			9,240		9,062		3,796		3,152
Amortization expense			1,743		1,777			5,181		5,308		1,824		1,702
Interest expense, net			24		149			106		745
Other (income) expense, net			(53)		(226)			129		(96)
Interest (income) expense, net												(9)		26
Other income, net												(69)		(3)

Income before provision for income taxes		$	13,155	$	13,960		$	33,714	$	31,837	$	10,366	$	9,645

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect our current view with respect to future events and financial performance and are subject to risks and uncertainties, including those set forth under “Cautionary statement” included in this “Management’s discussion and analysis of financial condition and results of operations” and elsewhere in this report, that could cause actual results to differ materially from historical or anticipated results.

We are the leading global provider of software and related services designed specifically for nonprofit organizations. Our products and services enable nonprofit organizations to increase donations, reduce fundraising costs, improve communications with constituents, manage finances and optimize internal operations. We have focused solely on the nonprofit market since our incorporation in 1982 and have developed our suite of products and services based upon our extensive knowledge of the operating challenges facing nonprofit organizations. As of ~~September 30, 2010,~~March 31, 2011, we had approximately 24,000 active customers. Our customers operate in multiple verticals within the nonprofit market, including education, foundations, health and human services, religion, arts and cultural, public and societal benefits, environment and animal welfare and international foreign affairs.

We derive revenue from selling perpetual licenses or charging for the use of our software products in a hosted environment and providing a broad offering of services, including consulting, training, installation and implementation, as well as ongoing customer support and maintenance. Consulting, training and implementation services are generally not essential to the functionality of our software products and are sold separately. Furthermore, we derive revenue from providing hosting services, performing donor prospect research engagements, selling lists of potential donors, and providing benchmarking studies and data modeling services.

Overall, revenue for the ~~third~~first quarter of ~~2010 and the first nine months of 2010~~2011 increased ~~5% and 4%~~15% when compared to ~~the same periods in 2009, respectively.~~first quarter of 2010. When removing the impact of revenue from acquired companies and foreign currency translation, revenue increased by ~~5% and 3% when comparing~~12%. This increase was the ~~third quarter~~result of 2010 and the first nine months of 2010 to the same periods in 2009, respectively. Our recurring revenue, which is comprised of maintenance and subscription offerings and represents 64% of our revenue on a combined basis, continues to experience growth. Thecontinued growth in ~~maintenance revenue is principally driven by maintaining high renewal rates, new maintenance contracts associated with new license arrangements and existing client increases. The growth in~~our subscription revenue, is principally attributable to increased demand for our hosting services, online fundraising and data management ~~offerings.~~offerings and the shift in our business towards hosted solutions. Also contributing to the growth in revenue is an increase in our services revenue, which is primarily due to an increase in volume of consulting services provided. Revenue associated with our core perpetual license offerings ~~and related services has~~ decreased in the first quarter 2011 when compared ~~with~~to the ~~first nine months of 2009~~same period in 2010 as a result of the continuing decreases in sales of our perpetual license offerings to the mid-market customer ~~base. The decrease in sales of our perpetual license offerings to the mid-market customer~~ base, which is ~~primarily~~principally the result of ~~shift~~customers opting to purchase our solutions under alternative packaging with more flexible subscription-based pricing. We believe this trend will continue in ~~our customers’ buying preference away from perpetual license towards subscription-based offerings.~~the future.

Income from operations for the ~~third~~first quarter of ~~2010 decreased by $0.8 million and for the first nine months of 2010~~2011 increased by ~~$1.5~~$0.6 million when compared to ~~the same periods in 2009. The decrease in income from operations for the third~~first quarter of 2010 is primarily attributable to investments we are making in early stage Blackbaud Enterprise CRM implementations, adding services headcount in the third quarter as a result of accelerating the delivery of implementation engagements and higher commission rates associated with improved sales performance.2010. The increase in income from operations ~~for the first nine months of 2010~~ is primarily attributable to ~~the~~growth in revenue, partially offset by (1) $1.0 million of acquisition-related costs, (2) an increase of $0.6 million in stock-based compensation expense and (3) an increase in ~~maintenance~~selling and ~~subscription gross profit which~~marketing expenses of $2.9 million. The increase in selling and marketing expenses is ~~driven by~~principally attributable to an increase in commissionable revenue and an increase in marketing costs associated with the ~~continued strong retention rate~~launch of our ~~solutions that are offered under recurring revenue arrangements~~new corporate branding and ~~the scalability of our infrastructure that supports these~~newly packaged offerings.

We ended the ~~third~~first quarter of ~~2010~~2011 with cash and cash equivalents totaling ~~$26.3 million. At September 30, 2010, we had~~$24.1 million and no outstanding borrowings on our credit facility. During the ~~nine months ended September 30, 2010,~~first quarter 2011, we generated ~~$48.9~~$17.5 million in cash ~~flows~~flow from ~~our~~ operations, of which we$16.5 million was used to ~~purchase $22.6~~acquire a business and $5.3 million ~~of treasury stock,~~ to pay ~~$14.6 million in dividends and to purchase $10.6 million of equipment.~~

The pace and impact of economic recovery on the nonprofit market remains uncertain and, consequently, we expect that our operating environment will continue to be challenging ~~through the remainder of 2010~~in 2011 as existing and prospective customers remain cautious in their expenditure decisions. Notwithstanding these conditions, we remain focused on execution, investing in our key growth initiatives, ~~and~~ strengthening our leadership ~~position. To the extent~~position and carefully managing our ~~operating results continue to be challenged by a weakened economic environment, we will focus on controlling and, as necessary, reducing~~ costs and expenses ~~of our operations~~ to achieve our targeted level of profitability.

Comparison of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~

We completed the acquisition of ~~RLC,~~Public Interest Data, Inc., or PIDI, on ~~April 29, 2009.~~February 1, 2011. We have included ~~RLC’s~~PIDI’s results of operations in our consolidated results of operations from the date of acquisition, which impacts the comparability of our results of operations. We have noted in the discussion below, to the extent meaningful, the impact on the comparability of our results of operations due to the inclusion of PIDI. During the ~~nine months ended September 30, 2010, RLC’s~~first quarter 2011, PIDI’s total revenue was ~~$2.2~~$1.4 million and ~~cost of revenue~~income from operations was ~~$0.9 million compared to total revenue of $1.0 million and cost of revenue of~~ $0.5 ~~million for the partial period from the date of acquisition through September 30, 2009.~~million.

The table below compares revenue from our statements of operations for the three ~~and nine~~ months ended ~~September 30, 2010~~March 31, 2011 with the same period in ~~2009.~~2010.


	Three months ended September 30,									Nine months ended September 30,									Three months ended March 31,
(in millions)	2010		2009		Change		% Change			2010		2009		Change		% Change			2011		2010		Change		% Change
License fees	$	5.1	$	5.9	$	(0.8)		(14)	%	$	17.2	$	19.1	$	(1.9)		(10)	%	$	4.6	$	5.2	$	(0.6)		(12)	%
Subscriptions																				25.5		19.2		6.3		33	%
Services		24.0		22.8		1.2		5	%		64.9		66.4		(1.5)		(2)	%		24.0		20.1		3.9		19	%
Maintenance		31.4		29.8		1.6		5	%		93.0		86.6		6.4		7	%		31.8		30.5		1.3		4	%
Subscriptions		21.2		19.2		2.0		10	%		60.8		53.7		7.1		13	%
Other		1.5		1.5		-		0	%		4.2		4.6		(0.4)		(9)	%		1.4		1.2		0.2		17	%
Total revenue	$	83.2	$	79.2	$	4.0		5	%	$	240.1	$	230.4	$	9.7		4	%	$	87.3	$	76.2	$	11.1		15	%

Total revenue increased ~~$4.0~~$11.1 million, or 5%15%, in the ~~third~~first quarter of ~~2010~~2011 when compared to the ~~third~~first quarter of ~~2009.~~2010. The increase in revenue is primarily attributable to growth in our subscription ~~maintenance~~ and ~~service~~services revenue. The increase in subscription revenue is primarily ~~attributable~~due to an increase in demand for our hosting services, online fundraising and data management offerings. The growth in revenue from our subscription offerings is also a result of the ongoing evolution of our product offerings from traditional perpetual license-based arrangements with upfront payments to subscription-based ~~offerings.~~offerings with more flexible pricing and payments. Services revenue grew principally due to an increase in the volume of consulting services associated with implementation engagements of Blackbaud Enterprise CRM. The increase in maintenance revenue is attributable to new maintenance contracts associated with new license agreements sold over the last twelve months and increases in contracts with existing customers in the third quarter of 2010. Services revenue growth is primarily due to an increase in demand for consulting service associated with our Blackbaud Enterprise CRM offering and online fundraising offerings. These increases are offset by a decrease in license fees which is principally attributable to a smaller contribution in the third quarter 2010 from Blackbaud Enterprise CRM perpetual license arrangements that had upfront revenue recognition when compared to third quarter 2009.

Total revenue increased $9.7 million, or 4%, in the first nine months of 2010 compared to the same period in 2009. The increase in revenue is primarily due to increases in maintenance and subscriptions revenue, partially offset by decreases in license fees and services revenue. The increase in subscription revenue is principally due to an increase in demand for our hosting services, online fundraising and data management offerings. The increase in maintenance revenue is attributable to new maintenance contracts associated with new license agreements and increases in contracts with existing ~~customers. The decreases in license fees and services revenue is principally attributable to a smaller contribution in~~customers when comparing the first ~~nine months~~quarter of ~~2010 from Blackbaud Enterprise CRM perpetual license arrangements that had upfront revenue recognition when compared~~2011 to the same period in ~~2009. Additionally, we continue~~2010. The decrease in license fees is principally attributable to ~~experience a~~the continued shift in our customers’ buying preference away from perpetual license arrangements towards subscription-based hosted applications.

The operating results analyzed below are presented on a non-GAAP basis: the results exclude the impact of stock-based compensation expense, amortization of intangibles arising from business combinations, gain on the sale of assets and acquisition-related expenses incurred in connection with our 2011 acquisition of PIDI because, in managing our operations, we believe that the exclusion of these costs allows us to better understand and manage our operating expenses and cash needs. These excluded costs are analyzed separately following the discussion of operating expenses.

The operating results analyzed below are presented on a non-GAAP basis; the results exclude the impact of stock-based compensation expense and amortization of intangibles arising from business combinations because, in managing our operations, we believe that the exclusion of these costs allows us to better understand and manage other operating expenses and cash needs. These excluded costs are analyzed separately following the discussion of operating expenses.


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,

(in millions)	2010		2009		Change		% Change		2010		2009		Change		% Change		2011		2010		Change		% Change
License fee revenue	$	5.1	$	5.9	$	(0.8)		(14)%	$	17.2	$	19.1	$	(1.9)		(10)%	$	4.6	$	5.2	$	(0.6)		(12)%
Direct controllable cost of license fees		0.5		0.9		(0.4)		(44)%		1.9		2.6		(0.7)		(27)%
Controllable cost of license fees																		0.5		0.5		-		0%

License fee gross profit	$	4.6	$	5.0	$	(0.4)		(8)%	$	15.3	$	16.5	$	(1.2)		(7)%	$	4.1	$	4.7	$	(0.6)		(13)%

License fee gross margin		90%		85%						89%		86%						89%		90%

Revenue from license fees is derived from the sale of our software products under a perpetual license agreement. We continue to experience a shift in our customers’ buying preference away from solutions offered under perpetual license arrangements towards subscription-based hosted applications. Additionally, we continue to experience longer sales cycle times, delays and postponements of purchasing decisions and overall caution exercised by existing and prospective customers as a result of continued challenges posed by the ~~weak~~weakened economic environment. ~~In addition, we are increasingly experiencing a shift in our customers’ buying preference away from perpetual license towards subscription-based hosted applications.~~

During ~~the third~~first quarter ~~of 2010 when compared to the same period in 2009,~~2011, revenue from license fees to existing customers increased ~~$0.2~~$0.1 million and sales to new customers decreased by ~~$1.0~~$0.7 million. The decrease in license fees is largely the result of a smaller contribution in the third quarter of 2010 from Blackbaud Enterprise CRM arrangements with upfront revenue recognition when compared to the third quarter of 2009.

During the first nine months of 2010 when compared to the same period in 2009, revenue from license fees to existing customers increased $0.7 million, offset by a $2.6 million decrease in sales to new customers. The decrease in license fees is largely the result of a smaller contribution in the first nine months of 2010 from Blackbaud Enterprise CRM arrangements with upfront revenue recognition when compared to the first nine months of 2009.

Direct controllable cost of license fees is principally comprised of third-party software royalties and variable reseller commissions. ~~The decrease in cost~~Cost of license fees in the ~~third~~first quarter ~~and first nine months~~ of ~~2010~~2011 compared to the same ~~periods~~period in 2009 is primarily attributable to lower third-party software royalty costs. Third-party software royalty costs have decreased due to the decrease in sales of perpetual licenses when comparing the third quarter and first nine months of 2010 ~~to the same periods in 2009.~~remained unchanged.

The ~~increase~~percentage point decrease in license fee gross margin in the ~~third~~first quarter of ~~2010 and the first nine months of 2010~~2011 compared to the same ~~periods~~period in ~~2009~~2010 is the result of ~~a change~~an increase in the mix of ~~products sold. During 2010,~~license revenue for which we ~~sold fewer products that have third-party software royalty costs~~paid variable reseller commissions during the first quarter of 2011 when compared to the same period in 2010.

Revenue from subscriptions is principally comprised of revenue from providing access to hosted applications and hosting services, access to certain data services and our online subscription training offerings, and variable transaction fees associated with ~~them.~~the use of our products to fundraise online. Included in subscriptions revenue is $1.1 million of revenue attributable to the inclusion of PIDI and an out-of-period adjustment of $1.7 million, which increased subscription revenue in first quarter 2011, related to our accounting for subscription-based offerings that were earned in prior periods. Excluding revenue from PIDI and the out-of-period adjustment, the increase in subscription revenue of $3.6 million, or 19%, is principally attributable to the increase in demand for hosting services, online fundraising and data management offerings. We continue to experience growth in our hosted applications business and are increasingly experiencing a shift in our customers’ buying preference away from traditional perpetual licenses arrangements with upfront payment terms towards subscription based-offerings with more flexible pricing and payments. Additionally, revenue from our hosting services continues to increase as demand for these services continues to grow from both our existing and new perpetual license customers.

Controllable cost of subscriptions is primarily comprised of human resource costs, third-party royalty and data expenses, hosting expenses, an allocation of depreciation, facilities and IT support costs and other costs incurred in

providing support and services to our customers. The increase in cost of subscriptions in the first quarter of 2011 compared to the same period in 2010 is principally attributable to an increase in headcount as a result of the inclusion of PIDI and investments we are making in our infrastructure to support the growth in our subscription offerings. Human resource costs increased $1.4 million as a result of the increase in headcount. The remaining increase is due to an increase in data center operating costs.


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,
(in millions)	2010		2009		Change		% Change		2010		2009		Change		% Change		2011		2010		Change		% Change
Services revenue	$	24.0	$	22.8	$	1.2		5%	$	64.9	$	66.4	$	(1.5)		(2)%	$	24.0	$	20.1	$	3.9		19%
Direct controllable cost of services		16.3		14.6		1.7		12%		46.5		44.9		1.6		4%
Controllable cost of services																		18.2		15.1		3.1		21%

Services gross profit	$	7.7	$	8.2	$	(0.5)		(6)%	$	18.4	$	21.5	$	(3.1)		(14)%	$	5.8	$	5.0	$	0.8		16%

Services gross margin		32%		36%						28%		32%						24%		25%

Services revenue consists of consulting, installation, implementation, education ~~services~~ and analytic services. Consulting, installation and implementation services involve converting data from a customer’s existing system, ~~assisting~~assistance in file ~~set-up~~set up and system configuration, and/or process re-engineering. Education services involve customer training activities. Analytic services are comprised of donor prospect research, selling lists of potential donors, benchmarking studies and data modeling services. These services involve the assessment of current and prospective donor information of the customer and are performed using our proprietary analytical tools. The end product enables ~~the customer~~organizations to more effectively target ~~its~~their fundraising activities. We recognize services revenue attributable to consulting services for implementation of our hosted applications and subscription offerings ratably over the related term of the hosting or subscription arrangement. We also recognize the direct and incremental costs associated with consulting services revenue ratably over the service period. However, we continue to expense indirect costs in the period the cost is incurred.

~~The~~Overall, the increase in services revenue during the ~~third~~first quarter ~~of 2010~~2011 when compared to the same period in ~~2009~~2010 is principally attributable to an increase in consulting services revenue of ~~$1.4~~$3.5 million, ~~and~~ analytic services revenue of ~~$0.3~~$0.6 million and education services revenue of $0.6 million, partially offset by ~~a decrease~~an out-of-period adjustment recorded in ~~education service revenue~~the first quarter of ~~$0.5 million. The rates we charge for our education and analytic service offerings have remained relatively constant year over year and, as such, the change in revenue is principally the result~~2011 of ~~a change in volume of~~$0.8 million which reduced consulting services ~~provided.~~revenue. The increase in consulting services revenue is principally attributable to an increase in the volume of ~~services provided, which is largely due to an increase in the demand for~~ consulting, installation and implementation services associated with our Blackbaud Enterprise CRM product offering, ~~and our internet-based fundraising offerings.~~

~~The decrease in services revenue during the first nine months of 2010 when compared to the same period in 2009 is principally attributable to a decrease in education services revenue of $2.5 million,~~which was partially offset by ~~an increase~~a reduction in the effective rates we charge as a result of a higher level of discounts offered on our consulting services ~~revenue of $1.0 million. Analytic services remained relatively unchanged~~offerings during ~~the first nine months of 2010 when compared to the same period in 2009.~~2010. The rates we charge for our education ~~service~~and analytic services offerings have remained relatively constant year over year and, as such, the ~~decrease~~increase in revenue is principally the result of ~~a decrease in the volume of education services provided. The increase in consulting services revenue is principally attributable to~~ an increase in volume of services provided, partially offset by an increase in our investment, in the form of non-billable implementation hours, in early adopters of our Blackbaud Enterprise CRM offering. The increase in volume of services provided is largely due to an increase in the demand for consulting services associated with our Blackbaud Enterprise CRM offering and our internet based fundraising offerings.provided.

~~Cost~~Controllable cost of services is principally comprised of human resource costs, third-party contractor expenses, classroom rentals, other costs incurred in providing consulting, installation and implementation services and customer training, data expense incurred to perform analytic services and an allocation of depreciation, facilities and IT support costs. The increase in cost of services of ~~$1.7~~$3.1 million in the ~~third~~first quarter ~~of 2010~~2011 when compared to the same period in ~~2009~~2010 is primarily attributable to an increase in human resource ~~costs of $0.9 million,~~and third-party contractor costs of ~~$0.6~~$2.7 million, ~~and travel related costs of $0.2 million. The increase in human resource costs and third-party contractor costs is principally attributable to~~which was driven by the need for additional resource capacity to meet the increasing demand for consulting ~~services demands~~services. Additionally, we continue to experience a shift in the mix of consultants to meet the needs of our enterprise customers, ~~and~~which require a ~~result~~higher level of ~~an acceleration of delivery of implementation engagements.~~

The increase in cost of services of $1.6 million in the first nine months of 2010 when compared to the same period in 2009 is primarily attributable to an increase in human resource costs of $1.5 million and third-party contractor costs of $0.9 million, partially offset byskilled resources that carry a decrease in training-related costs of $0.5 million and data expense of $0.3 million. The increase in human resource costs and third-party contractor costs is principally attributable to the need for additional resource capacity to meet the increasing consulting services demands of our customers.

The services gross margin decreased in the third quarter of 2010 and the first nine months of 2010 compared to the same period in 2009 primarily as a result of providing non-billable implementation hours for the benefit of early adopters of our Blackbaud Enterprise CRM offering and additional headcount to meet the increasing consulting services demands of our customers.higher cost.


																					Three months ended March 31,
	Three months ended September 30,				Change				% Change		Nine months ended September 30,						Change		% Change
(in millions)	2010		2009					2010				2009				2011			% Change		2010		Change		% Change
Maintenance revenue	$	31.4	$	29.8	Change		$	1.6	% Change		5%		$	93.0		$	Change	86.6	$	6.4		7%	$	31.8	$	30.5	$	1.3	4%
Direct controllable cost of maintenance		5.8		4.9		0.9				18%		16.5			14.6			1.9		13%
Controllable cost of maintenance																						5.8		5.3		0.5		9%

Maintenance gross profit	$	25.6	$	24.9	$	0.7				3%	$	76.5		$	72.0		$	4.5		6%	$	26.0	$	25.2	$	0.8		3%

Maintenance gross margin		82%		84%								82%			83%							82%		83%

Revenue from maintenance is comprised of annual fees derived from maintenance contracts associated with new software licenses and annual renewals of existing maintenance contracts. These contracts provide customers with updates, enhancements and upgrades to our software products and online, telephone and email support. The increase in maintenance revenue of ~~$1.6~~$1.3 million in the ~~third~~first quarter of ~~2010~~2011 compared to the ~~same period in 2009~~first quarter of 2010 is principally comprised of ~~$3.2~~$2.3 million of maintenance ~~from new customers associated~~ with ~~new license agreements and increases in contracts with existing customers, offset by $1.6 million from maintenance contracts that were not renewed.~~

~~The increase in maintenance revenue of $6.4 million in the first nine months of 2010 compared to the same period in 2009 is principally comprised of $9.4 million of maintenance from~~ new customers associated with new license agreements and increases in contracts with existing customers and ~~$0.2~~$0.9 million from maintenance contract inflationary rate adjustments, offset by ~~$3.2~~$1.9 million from maintenance contracts that were not renewed.

~~Direct controllable~~Controllable cost of maintenance is primarily comprised of human resource costs, third-party contractor expenses, third-party royalty costs, an allocation of depreciation, facilities and IT support costs and other costs incurred in providing support and services to our customers. The increase in cost of maintenance in the ~~third~~first quarter of ~~2010~~2011 compared to the same period in ~~2009~~2010 is principally attributable to an increase in ~~third-party royalty costs of $0.5 million,~~ human resource costs of $0.2 million and other costs of $0.2 million. The increase in third-party royalty costs is attributable to increases in maintenance contracts with new and existing customers for software products which include third-party software arrangements.costs. Human resource costs increased due to ~~salary merit increases and~~ an increase in headcount and a change in the mix of support resources. Headcount increased due to ~~meet the~~an increase in volume of our new maintenance contracts and increases in our existing maintenance customer contracts.

~~The increase in cost of maintenance~~ Additionally, we continue to experience a shift in the ~~first nine months~~mix of ~~2010 compared~~support resources to the ~~same period in 2009 is principally attributable to an increase in third-party royalty costs~~meet the needs of ~~$1.2 million and human resource costs~~our enterprise customers, which require a higher level of $0.7 million. The increase in third-party royalty costs is attributable to increases in maintenance contracts with new and existing customers for software products which include third-party software arrangements. Human resource costs increased due to salary merit increases and an increase in headcount associated with the continued growth in our customer support function commensurate with maintenance revenue growth.skilled resources that carry a higher cost.

The decrease in maintenance gross margin in first quarter 2011 is due to additional headcount to meet the ~~third~~increasing needs of our customers.

Other revenue includes the sale of business forms that are used in conjunction with our software products, reimbursement of travel-related expenses, primarily incurred during the performance of services at customer locations and fees from user conferences. Other revenue increased in the first quarter of ~~2010 and the first nine months of 2010~~2011 when compared to the same ~~periods~~period in ~~2009~~2010 primarily due to an increase in reimbursable travel-related costs from our services business.

Controllable cost of other revenue includes human resource costs, costs of business forms, costs of user conferences, reimbursable expenses relating to the performance of services at customer locations and an allocation of depreciation, facilities and IT support costs.

The increase in other gross margin is due to ~~existing client maintenance increases for software products which include third-party royalty costs and the increasing diversity~~an increase in realization of ~~our product offerings.~~reimbursable travel-related expenses.

Revenue from subscriptions is principally comprised of revenue from providing access to hosted applications and hosting services, access to certain data services and our online subscription training offerings, and variable transaction fees associated with the use of our products to fundraise online. We continue to experience growth in our hosted applications business and are increasingly experiencing a shift in our customers’ buying preference away from perpetual licenses towards subscription based-offerings. Additionally, revenue from our hosting services continues to increase as demand for these services continues to grow from both our existing and new perpetual license customers. The increase in subscription revenue for the third quarter of 2010 and the first nine months of 2010 compared to the same periods of 2009 is principally attributable to the increase in demand for hosting services, data management offerings and online fundraising offerings.

Direct controllable cost of subscriptions is primarily comprised of human resource costs, third-party royalty and data expenses, hosting expenses, an allocation of depreciation, facilities and IT support costs and other costs incurred in providing support and services to our customers. The increase in cost of subscriptions in the third quarter of 2010 compared to the same period in 2009 is principally due to an increase in data expense, hosting and other costs resulting from an increase in the demand for hosting and other online services.

The increase in cost of subscriptions in the first nine months of 2010 compared to the same period in 2009 is principally due to an increase in human resource costs of $1.2 million as a result of an increase in headcount. Data expense and hosting costs also increased resulting from an increase in the demand for hosting and other online services.

The increase in subscriptions gross margin in the third quarter of 2010 and the first nine months of 2010 compared to the same periods in 2009 is due to an increase in demand for our subscription-based offerings and the scalability of our infrastructure that supports these offerings.

Other revenue includes the sale of business forms that are used in conjunction with our software products; reimbursement of travel-related expenses, primarily incurred during the performance of services at customer locations and fees from user conferences. Other revenue remained unchanged in the third quarter of 2010 when compared to the same period in 2009. Other revenue decreased in the first nine months of 2010 when compared to the same period in 2009 principally due to a decrease in fees from user conferences as a result of consolidating conferences previously held early in the year into our primary conference which occurs during the fourth quarter each year.

Direct controllable cost of other revenue includes human resource costs, costs of business forms, costs of user conferences, reimbursable expenses related to the performance of services at customer locations and an allocation of depreciation, facilities and IT support costs. The cost of other revenue remained unchanged in the third quarter of 2010 compared to the same period in 2009. The decrease in the first nine months of 2010 compared to the same period in 2009 is due to a decrease in the number of user conferences and the related costs, and a decrease in reimbursable travel expenses related to providing services at customer locations.

Other gross margin decreased in the first nine months of 2010 when compared to the same period in 2009. While we had fewer user conferences in 2010 when compared to 2009, we made greater investments in the 2010 user conferences when compared to 2009, which is driving the decrease in other gross margin.

The following schedule reconciles non-GAAP gross profit discussed above to gross profit as stated on the statement of operations:


	Three months ended September 30,											Nine months ended September 30,											Three months ended March 31,

(in millions)	2010			2009			Change		% Change			2010			2009			Change		% Change			2011		2010		Change		% Change
License fees	$	4.6		$	5.0		$	(0.4)		(8)	%	$	15.3		$	16.5		$	(1.2)		(7)	%	$	4.1	$	4.7	$	(0.6)		(13)%
Subscriptions																								17.2		12.8		4.4		34%
Services		7.7			8.2			(0.5)		(6)	%		18.4			21.5			(3.1)		(14)	%		5.8		5.0		0.8		16%
Maintenance		25.6			24.9			0.7		3	%		76.5			72.0			4.5		6	%		26.0		25.2		0.8		3%
Subscriptions		14.1			12.7			1.4		11	%		40.6			35.2			5.4		15	%
Other		0.2			0.2			-		0	%		0.4			0.5			(0.1)		(20)	%		0.3		0.1		0.2		200%

Total non-GAAP gross profit	$	52.2		$	51.0		$	1.2		2	%	$	151.2		$	145.7		$	5.5		4	%	$	53.4	$	47.8	$	5.6		12%

Less corporate costs not allocated:
Stock-based compensation expense		0.7			0.7			-		0	%		2.1			2.0			0.1		5	%		0.8		0.7		0.1		17%
Amortization of intangible assets acquired in business combinations		1.5			1.6			(0.1)		(6)	%		4.6			4.7			(0.1)		(2)	%		1.6		1.5		0.1		7%

Gross profit as stated in statements of operations	$	50.0		$	48.7		$	1.3		3	%	$	144.5		$	139.0		$	5.5		4	%	$	51.0	$	45.6	$	5.4		12%

Gross margin %		60	%		61	%							60	%		60	%							58%		60%

The operating expenses analyzed below are presented on a non-GAAP basis in that they exclude stock-based compensation expense. We believe that the exclusion of these costs allows us to better understand and manage other operating expenses and cash needs. Stock-based compensation expense is analyzed separately following the operating expense analysis.


	Three months ended September 30,												Nine months ended September 30,											Three months ended March 31,

(in millions)	2010			2009			Change			% Change			2010			2009			Change		% Change			2011		2010		Change		% Change
Sales and marketing expense excluding stock-based compensation	$	16.7		$	15.4		$	1.3			8	%	$	51.4		$	45.9		$	5.5		12	%	$	18.9	$	16.0	$	2.9		18%
Add: Stock-based compensation		0.3			0.4			(0.1)			(25)	%		1.0			1.1			(0.1)		(9)	%
Add: Stock-based compensation expense																									0.4		0.4		-		0%

Sales and marketing expense	$	17.0		$	15.8		$	1.2	��		8	%	$	52.4		$	47.0		$	5.4		11	%	$	19.3	$	16.4	$	2.9		18%

% of revenue (excluding stock-based compensation)		20	%		19	%								21	%		20	%							22%		21%

Sales and marketing expense includes salaries and related human resource costs, travel-related expenses, sales commissions, advertising and marketing materials, public relations and an allocation of depreciation, facilities and IT support costs. Sales and marketing expense in the ~~third~~first quarter of 2011 compared to the first quarter of 2010 ~~compared to the same period in 2009~~ increased by ~~$1.3~~$2.9 million ~~principally~~primarily due to an increase of ~~$0.8~~$1.4 million in commission expense. The increase in commission expense is ~~due~~principally attributable to higher commission rates ~~as a result of improved~~and an increase in commissionable sales ~~performance~~and revenue in ~~2010.~~2011. Additionally, ~~travel and other marketing expenses~~human resource costs increased by ~~$0.5~~$0.8 million ~~as a result of increased investment in selling~~ and marketing programs related costs increased by $ 0.6 million. Human resources costs increased due to ~~support~~additional headcount. The increase in marketing programs related costs is principally attributable to the launch of our new ~~offerings~~corporate branding and an increase in marketing costs associated with newly packaged offerings.

~~Sales~~The increase in sales and marketing expense as a percentage of revenue in the first ~~nine months~~quarter of 2011 when compared to first quarter of 2010 ~~compared to the same period in 2009 increased by $5.5 million primarily~~is principally due to an increase ~~of $2.9 million~~ in commission expense. ~~The increase in commission expense is~~

principally attributable to higher commission rates in 2010 and an out of period adjustment of $0.8 million recorded during the second quarter of 2010 related to our accounting for deferred sales commissions. Additionally, human resource costs increased by $0.7 million as a result of additional headcount, salary merit increases and travel and other marketing expenses increased by $1.5 million as a result of increased investment in selling and marketing programs to support our new offerings and newly packaged offerings.

As a percentage of revenue, sales and marketing expense in the third quarter and first nine months of 2010 compared to the same periods in 2009 increased principally as a result of higher commission rates and additional investments in our sales and marketing efforts.


	Three months ended September 30,								Nine months ended September 30,								Three months ended March 31,

(in millions)	2010		2009		Change		% Change		2010		2009		Change		% Change		2011		2010		Change		% Change
Research and development expense excluding stock-based compensation	$	11.1	$	10.7	$	0.4		4%	$	32.3	$	32.0	$	0.3		1%	$	11.2	$	10.2	$	1.0		10%
Add: Stock-based compensation		0.7		0.7		-		0%		2.1		2.1		-		0%		0.8		0.7		0.1		14%

Research and development expense	$	11.8	$	11.4	$	0.4		4%	$	34.4	$	34.1	$	0.3		1%	$	12.0	$	10.9	$	1.1		10%

% of revenue (excluding stock-based compensation)		13%		14%						13%		14%						13%		13%

Research and development expenses include human resource costs, third-party contractor expenses, software development tools and other expenses related to developing new products, upgrading and enhancing existing products and an allocation of depreciation, facilities and IT support costs. ~~The~~During the first quarter of 2011, the increase in research and development costs ~~during the third quarter of 2010 compared to the same period in 2009~~ is principally ~~due~~attributable to an increase in human resource costs ~~of $0.4 million principally attributable to salary merit increases, partially offset by an increase of $0.2 million in costs allocated to cost of services. Costs allocated to cost of services~~resulting from the ongoing investment we are related to development efforts supporting product customizations under revenue generating arrangements. Third-party contractor costs also increased by $0.2 million. Human resource costs and third-party contractor costs have increased as we continue to investmaking in our ~~product development efforts.~~

The increase in research and development costs during the first nine months of 2010 compared to the same period in 2009 is principally due to an increase in third-party contractor costs of $0.4 million. Third-party contractor costs have increased as we continue to invest in our product development efforts. Human resource costs increased by $0.7 million during the first nine months of 2010 compared to the same period in 2009, all of which was offset by an increase of $0.7 million in costs allocated to cost of services commensurate with the development efforts supporting product customizations under revenue generating arrangements.

The decrease in research and development costs as a percentage of revenue during the third quarter of 2010 and the first nine months of 2010 compared to the same periods in 2009 is principally attributable to an increase in costs allocated to cost of services commensurate with the development efforts supporting product customizations under revenue generating arrangements.products.

General and administrative expense consists primarily of human resource costs for general corporate functions, including senior management, finance, accounting, legal, human resources, corporate development, third-party professional fees, insurance, an allocation of depreciation, facilities and IT support costs, and other administrative expenses. During the ~~third~~first quarter ~~of 2010~~2011 compared to the same period in 2009 general and administrative expense remained unchanged. Decreases in human resource costs attributable to a decrease in headcount resulting from consolidation and centralization efforts of our accounting function in the second half of 2009 and first quarter of 2010, ~~were offset by increased recruitment and hiring costs associated with certain executive management and Board of Directors positions.~~

~~During the first nine months of 2010 compared to the same period in 2009,~~ the decrease in general and administrative expense ~~was principally due to a decrease in human resource costs of $1.4 million, bad debt expense of $0.2 million~~ and ~~other costs of $0.2 million. The decrease in human resource costs is primarily due to a decrease in headcount resulting from consolidation and centralization efforts of our accounting function in~~ the ~~second half of 2009 and first quarter of 2010.~~

~~The decrease~~reduction in general and administrative costs as a percentage of revenue ~~during the first nine months of 2010 compared~~was principally due to ~~the same periods~~a decrease in 2009 is principally attributable to the realization of cost reductions resulting from the consolidation and centralization efforts in our accounting function implemented in the second half of 2009 and first quarter 2010.professional services costs.

We recognize compensation expense related to stock-based awards granted to employees. We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the requisite service period, which is the vesting period.

~~Our consolidated statements of operations for the three and nine months ended September 30, 2010 and 2009 include the amounts of stock-based compensation illustrated below:~~

Stock-based compensation is comprised of expense from common stock awards, stock options, restricted stock units and awards and stock appreciation rights. The table below summarizes the stock-based compensation by award type for the three and nine months ended September 30, 2010 and 2009.

Our consolidated statements of operations for the three months ended March 31, 2011 and 2010 include the amounts of stock-based compensation illustrated below:

During the third quarter of 2009 and the first nine months of 2009, we expensed $0.1 million and $0.9 million, respectively, related to compensation and incentive arrangements payable in common stock associated with business acquisitions completed in 2008 and 2007. There were no similar arrangements payable in common stock in the first nine months of 2010.

Stock-based compensation is comprised of expense from restricted stock, ~~awards~~performance-based restricted stock units and stock appreciation ~~rights slightly~~rights. The table below summarizes the stock-based compensation by award type for the three months ended March 31, 2011 and 2010.

Stock-based compensation expense increased in the ~~third~~first quarter of ~~2010 and the first nine months of 2010~~2011 compared to the same ~~periods~~period in ~~2009~~2010 due to ~~the issuance of~~ additional grants ~~and rights~~ in the second ~~half of 2009 and first~~ half of 2010, partially offset by the vesting of grants issued in prior years.

The total amount of compensation costs related to non-vested awards not yet recognized was ~~$21.9~~$31.0 million as of ~~September 30, 2010.~~March 31, 2011. This amount will be recognized as expense over a weighted average period of ~~1.6~~1.8 years.

We allocated amortization expense to cost of revenue based on the nature of the respective identifiable intangible asset and whether the asset is directly associated with a specific component of revenue. Amortization expense included in our consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ is illustrated below:


(in millions)	Three months ended September 30,				Change			% Change		Nine months ended September 30,					Change			% Change
(in millions)												Three months ended March 31,						% Change
(in millions)	2010		2009		Change		Change				% Change		2010				2009			Change			% Change			2011				2010				Change			% Change
(in millions)															Change					Change
Cost of license fees	$	0.1	$	0.1	$	-	Change			0%	% Change		$	0.3		$	0.3		$	-			% Change	0%			$	0.1			$	0.1			$	-		0%
Cost of subscriptions																						0.8			0.8				-				0%
Cost of services		0.3		0.4		(0.1)			(25)%		1.0		1.0			-			0%			0.4			0.3				0.1				33%
Cost of maintenance		0.3		0.3		-			0%		0.9		1.0			(0.1)			(10)%			0.3			0.3				-				0%
Cost of subscriptions		0.8		0.8		-			0%		2.3		2.4			(0.1)			(4)%
Cost of other revenue		-		-		-			0%		0.1		-			0.1			0%			-			-				-				-%

Total included in cost of revenue		1.5		1.6		(0.1)			(6)%		4.6		4.7			(0.1)			(2)%			1.6			1.5				0.1				7%
Included in operating expenses		0.2		0.2		-			0%		0.6		0.6			-			0%			0.2			0.2				-				0%

Total	$	1.7	$	1.8	$	(0.1)		$	(6)%	$	5.2	$	5.3		$	(0.1)		$	(2)%		$	1.8		$	1.7			$	0.1				6%

~~Interest expense decreased slightly~~During the first quarter 2011, we expensed $1.0 million of acquisition-related costs, which were recorded in ~~the third quarter of 2010 compared to the same period in 2009. Interest expense was $0.2 million~~general and administrative expense. There were no similar expenses in the first ~~nine months~~quarter 2010.

During the first quarter 2011, we recognized a gain of $0.5 million ~~for~~from the ~~same period~~sale of intangible assets, which was recorded as a reduction of general and administrative expense. There was no similar transaction in 2009. These decreases in interest expense are directly related to repayment of debt during the second half of 2009. As of September 30, 2010 we had no borrowings outstanding on our credit facility compared to $17.5 million at September 30, 2009 and $59.0 million at December 31, 2008.first quarter 2010.

~~We record income tax expense in our consolidated financial statements based on an estimated annual effective income tax rate, prior to any quarter-specific items.~~ The ~~2010~~ estimated annual effective tax rate ~~of 38.9%~~for 2011 is 36.3%, which excludes period-specific items. Following is our effective tax rate, including the effects of period-specific items:

Period-specific items ~~was applied as~~recorded in the ~~effective rate for the nine~~three months ended ~~September 30, 2010. Our actual effective rate for the three and nine months ended September 30, 2010 and 2009 were as follows:~~

~~During the three and nine months ended September 30, 2010, period-specific items were principally attributable to the recognition of tax benefits related to~~March 31, 2011 included a ~~change in estimate for 2009 research and development credits of $0.5~~

million, net of reserves for uncertain tax positions. The lower effective rate in the same periods in 2009 was primarily attributable to the recognition of tax benefits related to changes in estimates of 2007 and 2008 research and development credits and domestic production activities deductionsdecrease of $1.0 million in the valuation allowance for certain state net ~~of reserves for uncertain~~operating loss carryforwards, which reduced income tax ~~positions.~~expense. There were no material period-specific items recorded in the three months ended March 31, 2010.

Our deferred tax assets and liabilities are recorded at an amount based upon a U.S. federal income tax rate of 35.0% and appropriate statutory tax rates of various foreign, state and local jurisdictions in which we operate. If our tax rates change in the future, we will adjust our deferred tax assets and liabilities to an amount reflecting those income tax rates. Any change will affect the provision for income taxes during the period in which the determination is made.

The amount of unrecognized tax benefit that, if recognized, would favorably affect our effective rate as of ~~September 30, 2010~~March 31, 2011 was ~~$1.2~~$1.5 million. ~~As of September 30, 2010, the total amount of accrued interest and penalties included in the consolidated balance sheet was $0.2 million.~~

We have taken positions in certain taxing jurisdictions related to state nexus issues for which

it is reasonably possible that the total ~~amounts~~amount of unrecognized tax benefits may ~~significantly~~ decrease within the next twelve months. The possible decrease could result from the finalization of state income tax reviews and the expiration of statutes of limitations. The reasonably possible decrease ~~is $0.3 million.~~was not material at March 31, 2011.

At ~~September 30, 2010,~~March 31, 2011, cash and cash equivalents totaled ~~$26.3~~$24.1 million, compared to ~~$22.8~~$28.0 million at December 31, ~~2009.~~2010. The ~~$3.5~~$3.8 million ~~increase~~decrease in cash and cash equivalents during the first ~~nine months~~quarter of ~~2010~~2011 is principally the result of ~~generating~~using cash generated from operations of ~~$48.9 million. Cash generated from operations was used to purchase $22.6~~$17.5 million ~~of treasury stock,~~and cash on hand to pay ~~$14.6~~$16.5 million to acquire a business and $5.3 million in dividends to stockholders and to buy $10.6 million of fixed assets. Donor restricted cash represents donations collected by us on behalf of our customers and fluctuates based on the timing of our customers’ fundraising activity. These funds are used exclusively for the payment of donations payable.stockholders.

Our principal source of liquidity is our operating cash flow, which depends on continued customer renewal of our maintenance, support and subscription agreements and market acceptance of our products and services. Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and pay dividends. Dividend payments are not guaranteed and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to declare or pay further dividends and/or repurchase our common stock.

At ~~September 30, 2010,~~March 31, 2011 we had no outstanding borrowings under our credit facility. We have drawn on our credit facility from time to time to help us meet short-term financial needs, such as business acquisitions and ~~purchases~~purchase of common stock under our repurchase program. Under ~~this five-year~~our $90.0 million credit facility, which matures in July 2012, we ~~may elect not more than twice over the five-year term of the agreement~~have a remaining option to increase the aggregate amount available ~~of $75.0 million~~ by up to ~~$50.0~~$35.0 million. ~~We exercised one of these options for an additional $15.0 million in June 2008.~~ We believe our ~~$90.0 million~~cash on hand, cash generated from operations and our credit facility provides us with sufficient flexibility to meet our financial needs.

Net cash provided by operating activities ~~for~~of $17.5 million increased by $10.2 million during the first ~~nine months of 2010 of $48.9 million decreased by $11.5 million~~quarter 2011 when compared to the ~~same period in 2009.~~first quarter of 2010. Throughout both periods, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization and stock-based compensation and adjustments to our provision for sales returns and allowances; (ii) the tax benefit associated with our deferred tax asset, which reduces our cash outlay for income ~~tax;~~tax expense; and (iii) changes in our working capital.

Working capital changes as they impact the statement of cash flows are composed of changes in accounts receivable, prepaid expenses and other ~~current~~ assets, accounts payable, accrued expenses, accrued liabilities and deferred revenue. Cash flow from operations associated with working capital increased $7.0 million in first quarter 2011 when compared to the same period in 2010. This net increase is principally due to:

Net cash used in the first quarter of 2011 for investing activities was $16.9 million compared to $5.2 million in the first quarter of 2010. The increase is principally due to the purchase of PIDI in first quarter 2011.

collections of accounts receivable and the change in deferred revenue represent a net increase in cash associated with working capital changes of $6.6 million and $13.1 million in the first nine months of 2010 and 2009, respectively. The year-over-year change is principally due to a decrease in the collections of accounts receivable in the first nine months of 2010 when compared to the same period in 2009, partially offset by a decrease in the billings in the first nine months of 2010 when compared to the same period in 2009. The decrease in collections is primarily the result of a longer collection cycle and a decrease in billings for consulting services and license fees. Changes in our balances of accounts payable, prepaid expenses, accrued liabilities and other current assets and liabilities represent a net decrease in cash associated with working capital changes of $4.4 million in first nine months of 2010 and a net increase of $2.9 million for the same period in 2009, respectively. The primary driver of the decrease in the net cash flow associated with these accounts is principally attributable to fluctuations in the timing of payments to vendors and income tax payments, and an increase in the amount of bonuses paid in 2010 when compared to 2009.

Net cash used in the first nine months of 2010 for investing activities was $13.1 million compared to $6.1 million in the same period in 2009. The increase is principally due to an increase in payments for property and equipment of $6.7 million, of which $3.7 million relates to payments in 2010 related to purchases made at the end of 2009.

Net cash used in financing activities for the first ~~nine months~~quarter of ~~2010~~2011 was ~~$32.4~~$4.8 million compared to ~~$48.8~~$1.5 million in the same period in ~~2009. During the first nine months of 2010,~~2010. The increase in cash used ~~for~~in financing activities ~~was principally attributable~~is primarily due to ~~$22.6 million of treasury stock purchases and $14.6 million of dividend payments to stockholders, partially offset by~~a decrease in proceeds from stock option ~~exercises. During the first nine months of 2009, cash used for financing activities was principally attributable to $42.3 million of payments on debt~~exercises and ~~$13.2 million of dividend payments to stockholders.~~related tax benefits.

As of ~~September 30, 2010,~~March 31, 2011, we had future minimum lease commitments of ~~$64.1~~$63.8 million. There were no material changes outside the ordinary course of business in our contractual obligations since December 31, ~~2009.~~2010.

We utilize third-party relationships in conjunction with our products. The contractual arrangements vary in length from one to three years. In certain cases, these arrangements require a minimum annual purchase commitment. The total minimum purchase commitments under these arrangements at ~~September 30, 2010 are $5.3~~March 31, 2011 were $3.5 million through 2013. We incurred expense under these arrangements of ~~$1.3~~$1.1 million and ~~$0.6~~$0.8 million for the three months ended ~~September 30,~~March 31, 2011 and 2010, ~~and 2009, respectively, and $3.4 million and $1.8 million for the nine months ended September 30, 2010 and 2009,~~ respectively.

In February ~~2010,~~2011, our Board of Directors approved our annual dividend of ~~$0.44~~$0.48 per share for ~~2010.~~2011. Dividends at the annual rate would aggregate to ~~$19.4~~$21.1 million assuming 4444.0 million shares of common stock are outstanding. Our ability to continue to declare and pay dividends may be restricted by, among other things, the terms of our credit facility, general economic conditions and our ability to generate operating cash flow.

We do not believe we currently have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons.

Approximately 14% of our total net revenue for the ~~nine-month~~three-month period ended ~~September 30, 2010~~March 31, 2011 was derived from operations outside the United States. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and,

accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded as a separate component of stockholders’ equity, was ~~$0.3 million and $0.2~~$0.5 million at ~~September 30, 2010~~March 31, 2011 and at December 31, ~~2009, respectively.~~2010.

The vast majority of our contracts are entered into by our U.S., Canadian or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars, contracts entered into by our Canadian subsidiary are generally denominated in Canadian dollars, and contracts entered into by our U.K., Australian and Netherlands subsidiaries are generally denominated in pounds sterling, Australian dollars and ~~euros,~~Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. During ~~third~~first quarter ~~2010, the~~2011, foreign translation ~~has~~ resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Though we do not believe our ~~increased~~ exposure to currency exchange rates have had a material impact on our results of operations or financial position, we intend to continue to monitor such exposure and take action as appropriate.

We operate in a highly competitive environment that involves a number of risks, some of which are beyond our control. The following statement highlights some of these risks.

Statements contained in this Form 10-Q, which are not historical facts, are or might constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we

believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained. Forward-looking statements involve known and unknown risks that could cause actual results to differ materially from expected results. Factors that could cause actual results to differ materially from our expectations expressed in the report ~~include~~include: general economic risk; lengthy sales and implementation cycles, particularly in larger organizations; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; ~~risk associated with successful implementation of multiple integrated software products;~~ management of integration of recently acquired companies and other risks associated with acquisitions; the ability to attract and retain key ~~personnel;~~personnel, including a new CFO; risk associated with successful implementation of multiple integrated software products; risks related to our dividend policy and stock repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends; risks relating to restrictions imposed by the credit facility; risks associated with management of growth; technological changes that make our products and services less competitive; and the other risk factors set forth from time to time in our SEC filings.

Due to the nature of our short-term investments and the lack of material debt, we have concluded at ~~September 30, 2010~~March 31, 2011 that we face no material market risk exposure. Therefore, no quantitative tabular disclosures are required. For a discussion of our exposure to foreign currency exchange rate fluctuations, see the “Foreign currency exchange rates” section of Management’s discussion and analysis of financial condition and results of operations in this report.

Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that they will meet their objectives. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide the reasonable assurance discussed above.

No change in internal control over financial reporting occurred during the most recent fiscal quarter with respect to our operations, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The following table provides information about shares of common stock repurchased during the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011 under ~~the~~our stock repurchase program, ~~then in effect,~~ as well as common stock withheld by us to satisfy tax obligations of employees due upon vesting of restricted ~~stock or exercise of stock appreciation rights.~~stock.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


Large accelerated filer x		Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial statements
	Consolidated balance sheets as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009~~2010 (unaudited)		1
	Consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ (unaudited)		2
	Consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ (unaudited)		3
	Consolidated statements of stockholders’ equity and comprehensive income for the ~~nine~~three months ended ~~September 30, 2010~~March 31, 2011 and the year ended December 31, ~~2009~~2010 (unaudited)		4
	Notes to consolidated financial statements (unaudited)		5
Item 2.	Management’s discussion and analysis of financial condition and results of operations		1716
Item 3.	Quantitative and qualitative disclosures about market risk		2927
Item 4.	Controls and procedures		2927

PART II.	OTHER INFORMATION
Item 2.	Unregistered sales of equity securities and use of proceeds		3128
Item 6.	Exhibits		3128

Signatures
Exhibit – 2.3
Exhibit – 31.1
Exhibit – 31.2
Exhibit – 32.1
Exhibit – 32.2
Exhibit – 101


(in thousands)	September 30, 2010		December 31, 2009
Deferred sales commissions	$	7,735	$	6,013
Prepaid software maintenance and royalties		4,111		4,694
Deferred professional service costs		2,679		1,242
Taxes, prepaid and receivable		1,690		3,736
Other		3,773		2,470

Total prepaid expenses and other current assets	$	19,988	$	18,155


(in thousands)	March 31, 2011		December 31, 2010
Deferred sales commissions	$	11,913	$	11,666
Prepaid software maintenance and royalties		4,363		4,352
Deferred professional services costs		4,261		3,447
Taxes, prepaid and receivable		2,342		10,826
Other		3,917		3,556

Total prepaid expenses and other current assets	$	26,796	$	33,847


Year ending December 31, (in thousands)	Operating leases		Capital leases
2010 – remaining	$	1,622	$	18
2011		6,492		39
2012		5,964		2
2013		5,202		-
2014		4,890		-
2015 and thereafter		35,810		-

Total minimum lease payments	$	59,980		59
Less: portion representing interest				3

Present value of net minimum lease payments				56
Less: current portion				53

Noncurrent portion			$	3


	Intangible assets acquired (in thousands)		Weighted average amortization period (in years)
Customer relationships	$	5,730		15
Marketing assets		150		2
Acquired software		1,720		8
Non-compete agreements		580		4

	$	8,180


	Three months ended September 30,					Nine months ended September 30,
(in thousands, except share and per share amounts)		2010		2009			2010		2009
Numerator:
Net income, as reported		$	8,519	$	9,828		$	21,261	$	20,488
Denominator:
Weighted average common shares			42,747,209		42,781,072			43,145,289		42,805,498
Add effect of dilutive securities:
Liabilities to be paid in shares of common stock			-		43,103			-		43,103
Employee stock options and restricted stock			725,613		1,002,375			735,265		644,761

Weighted average common shares assuming dilution			43,472,822		43,826,550			43,880,554		43,493,362

Earnings per share:
Basic		$	0.20	$	0.23		$	0.49	$	0.48
Diluted		$	0.20	$	0.22		$	0.48	$	0.47


Year ending December 31, (in thousands)
2011 – remaining	$	5,185
2012		6,175
2013		5,287
2014		5,010
2015		4,831
Thereafter		37,367

Total minimum lease payments	$	63,855


~~Declaration Date~~	~~Dividend per Share~~	~~Record Date~~	~~Payable Date~~
~~February 2010~~	~~$0.11~~	~~February 26~~	~~March 15~~
~~April 2010~~	~~$0.11~~	~~May 28~~	~~June 15~~
~~July 2010~~	~~$0.11~~	~~August 27~~	~~September 15~~


	Three months ended March 31,
	2011		2010
Effective tax rate		26.8%		38.3%


	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
Effective tax rate		35.2%		29.6%		36.9%		35.6%


Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (2)		Approximate dollar value of shares that may yet be purchased under the plan or programs (in thousands)
Beginning balance, July 1, 2010								$30,770
July 1, 2010 through July 31, 2010		50,760		$21.92		48,996		$29,700
August 1, 2010 through August 31, 2010		18,432		$24.08		-		$50,000
September 1, 2010 through September 30, 2010		33		$21.67		-		$50,000
Total		69,225		$22.49		48,996		$50,000


Exhibits:

2.3*		Stock Purchase Agreement by and among Public Interest Data, Inc. all of the Stockholders of Public Interest Data, Inc., Stephen W. Zautke, as Stockholder Representative and Blackbaud, Inc. dated as of February 1, 2011.

31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**		XBRL Instance Document.

101.SCH**		XBRL Taxonomy Extension Schema Document.

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.


		BLACKBAUD, INC.

Date: ~~November 8, 2010~~ May 10, 2011	By:	/s/ Marc E. Chardon
		Marc E. Chardon
		President and Chief Executive Officer

Date: ~~November 8, 2010~~ May 10, 2011	By:	/s/ Timothy V. Williams
		Timothy V. Williams
		Senior Vice President and Chief Financial Officer